I have been asked to comment on the validity of the following clause (not drafted by my firm!):
“I give to A and B my house at (ADDRESS), but if they decide to sell the property it shall form part of the residue of my estate”
I cannot be an absolute gift (as there is the ‘but’ provision). I think it is either void through uncertainty and falls into residue, or there is a life interest created in favour of A and B which terminates on sale.
What do other members think?
Rubin Lewis O’Brien
It could be a right to reside IPDI, but I would want to take Counsel’s opinion to cover my … insurance.
Is there an extension to this clause?
Cottingham Legal Wills and Probate Limited
This sounds more like a life interest, given they are completely restricted from access to the capital (proceeds of sale). Is a DoV possible between the specific and residuary legatees?
Nicholls Brimble Bhol
No, that is the entire clause. There is then a gift of residue to four people in equal shares including A and B.
Rubin Lewis O’Brien
In the absence of any notes taken by the drafter or communication with the testator which would indicate their intention, I think this is a condition subsequent; consequently unenforceable by the executor and so void. The gift falls into residue.
If we assume ‘testamentary freedom’ then you have a contingent IIP.
A&B are the life tenants, with whomever is entitled to the residue as remainderman. The contingency is valid IMO, similar contingences concerning remarriage and cohabitation.
We assume they would never sell?
I think you’d end up with a s.20 AJA 1982 claim from the residue beneficiary at some point if they enter care or both die without selling.
The gift would seem to be subject to a condition subsequent, the condition itself not being void.
Failure to observe the condition causes the beneficiary to lose his entitlement.
Thank you, Malcolm. I agree that a gift does not necessarily fail simply because of a condition subsequent. However, I do wonder if here the condition is sufficiently certain; “decide to sell” lacks clarity. Is a mere decision to sell sufficient to trigger the condition, even if they subsequently change their minds? If not, how far down the road to a sale would they have to go? Alternatively, what if, instead of selling, they transfer it into trust? Does that trigger the condition? And if they did sell it and clear off abroad with the money, what recourse would the other residual beneficiaries have? The problem is, once the executor transfers the property to A & B absolutely he is powerless to enforce the condition.
I agree that reading it as an IIP which determines on their ceasing to occupy, with the default beneficiaries as the remaindermen, gets around the problem, but I am not sure that the clause as drafted can bear that interpretation.
I am, at first glance, inclined to agree with Christian. The property would vest with the trustees and A&B could not put it into trust or sell it. It appears that the drafter may have inadvertently created a poorly drafted condition subsequent.
However the uncertainty of the ‘decide to sell’ wording is problematical. If a decision to sell is made (is it a joint and several decision? or joint only - I would have preferred wording along the lines of … either or both… but that is off topic) in my opinion I would be inclined to treat the decision as the trigger condition irrespective of any subsequent decision to change minds.
The decision is described as a ‘decision to sell’ not an actual sale. The parties to give effect to that condition are A&B. The time limit for the decision appears to be ‘until death’. The trustees would appear to have the authority to say when the condition is met.
I agree with Bish that the condition is valid, but see below.
But what happens to the property on the death of A and/or B?
If A/B decide not to sell, say A dies, does the property pass to B entire or does A’s share go to A’s estate for the benefit of A’s beneficiaries on B’s death - the sell condition has not been triggered.
If the condition subsequent is never triggered the property must pass to A&B’s estates on the second death. What if on A’s death, B now decides to sell. The property passes to residue, B can benefit - does the will allow A’s children or estate to benefit
But is B allowed to make a sell decision on his/her own as the clause states ‘they’.
As D Holliday writes, if you can get the drafter’s notes that may clarify intention. Failing that, recourse to Counsel or court may be the only alternative. The clause is unsatisfactory and it is difficult to understand the testators instructions and rectification under s.20 AJA 1982 may be a recourse.